Correlation Between Green Brick and Taylor Morn

Can any of the company-specific risk be diversified away by investing in both Green Brick and Taylor Morn at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Green Brick and Taylor Morn into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Green Brick Partners and Taylor Morn Home, you can compare the effects of market volatilities on Green Brick and Taylor Morn and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Green Brick with a short position of Taylor Morn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green Brick and Taylor Morn.

Diversification Opportunities for Green Brick and Taylor Morn

0.47

Correlation Coefficient

Green Brick  Taylor Morn

Very weak diversification

The 3 months correlation between Green and Taylor is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Green Brick Partners and Taylor Morn Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taylor Morn Home and Green Brick is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Green Brick Partners are associated (or correlated) with Taylor Morn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taylor Morn Home has no effect on the direction of Green Brick i.e., Green Brick and Taylor Morn go up and down completely randomly.

Pair Corralation between Green Brick and Taylor Morn

Given the investment horizon of 90 days Green Brick Partners is expected to under-perform the Taylor Morn. In addition to that, Green Brick is 1.23 times more volatile than Taylor Morn Home. It trades about -0.63 of its total potential returns per unit of risk. Taylor Morn Home is currently generating about -0.61 per unit of volatility. If you would invest  7,480  in Taylor Morn Home on September 25, 2024 and sell it today you would lose (1,364) from holding Taylor Morn Home or give up 18.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Green Brick Partners  vs.  Taylor Morn Home

Green Brick Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Brick Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Taylor Morn Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taylor Morn Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Green Brick and Taylor Morn

The main advantage of trading using opposite Green Brick and Taylor Morn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Green Brick position performs unexpectedly, Taylor Morn can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Taylor Morn will offset losses from the drop in Taylor Morn's long position.

The idea behind Green Brick Partners and Taylor Morn Home pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.